NAIROBI -- Volkswagen Group will resume building cars in Kenya by the end of the year as it looks to sell more vehicles across the East African region.
After a four-decade pause in production by the automaker in Kenya, VW will establish an assembly plant to initially produce its subcompact Polo Vivo hatchback, the country's President Uhuru Kenyatta and Thomas Schafer, Volkswagen's South Africa's CEO, said Wednesday at a meeting between government officials and VW executives.
Neither Kenyatta nor Schafer said how much VW was investing in the project.
The joint venture with local importer DT Dobie will assemble up to 5,000 Polo Vivos annually from knock-down kits at a plant operated by the Kenya Vehicle Manufacturers, VW said in a statement.
The project will be VW's third production facility in Africa alongside sites in South Africa and Nigeria.
Emerging-market production is familiar territory for VW, but Kenya's car market is dominated by low-priced second-hand imports from countries such as Japan.
VW, which assembled cars in Kenya in the 1960s and 1970s, will join other brands already being put together in the country, including Isuzu, Toyota, Nissan and Mitsubishi.
Kenya mostly assembles trucks, pickups and buses from kits supplied by foreign manufacturers, although data from the Kenya National Bureau of Statistics showed that the number of vehicles assembled between January and April was down 31 percent year-on-year to 2,258 vehicles.
The Kenya Vehicle Manufacturers Association (KVMA) attributed the slowdown to tough economic conditions for buyers, including high interest rates and cuts in government spending, while VW said it saw opportunity in the market.
"We believe that Kenya has got the potential to develop a very big fully-fledged automotive industry. The East African community has got the potential, and today is the first step in this direction that we want to take with our passenger cars," Schafer said.
VW is the second-biggest automaker by sales in South Africa after Toyota with its vehicles sold domestically as well as exported to the rest of Africa.
Kenyatta said that VW's assembly plant would begin with the Vivo and expand to a range of vehicles, with the first car expected to be rolled out before the end of the year.
Automotive News Europe contributed to this report